First Quarter 2017 Conference Call Presentation May 4 th , 2017 1 - - PowerPoint PPT Presentation
First Quarter 2017 Conference Call Presentation May 4 th , 2017 1 Agenda Forward-looking statements Denis Jasmin, Vice-President, Investor Relations CEO remarks Neil Bruce, President and Chief Executive Officer Financial
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›First Quarter 2017
›Conference Call Presentation ›May 4th, 2017 Forward-looking statements
› Denis Jasmin, Vice-President, Investor Relations
CEO remarks
› Neil Bruce, President and Chief Executive Officer
Financial overview
› Sylvain Girard, Executive Vice-President and Chief Financial Officer
Q&A
Reference in this presentation, and hereafter, to the “Company” or to “SNC-Lavalin” means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements. Statements made in this presentation that describe the Company’s or management’s budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be “forward-looking statements”, which can be identified by the use of the conditional or forward-looking terminology such as “aims”, “anticipates”, “assumes”, “believes”, “cost savings”, “estimates”, “expects”, “goal”, “intends”, “may”, “plans”, “projects”, “should”, “synergies”, “will”, or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: (i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses and future prospects; and (ii) business and management strategies and the expansion and growth of the Company’s operations. All such forward-looking statements are made pursuant to the “safe-harbour” provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company’s current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. Forward-looking statements made in this presentation are based on a number of assumptions believed by the Company to be reasonable as at the date
that the federal charges laid against the Company and its indirect subsidiaries SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc. on February 19, 2015, will not have a significant adverse impact on the Company’s business in 2017. If these assumptions are inaccurate, the Company’s actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company’s assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risk factors are set out in the Company’s 2016 MD&A and as updated in the first quarter 2017 MD&A.
›The 2017 outlook referred to in this presentation is forward-looking information and is based on the methodology described in the Company’s 2016 MD&Aunder the heading “How We Budget and Forecast Our Results” and is subject to the risks and uncertainties described in the Company’s public disclosure
regarding the Company’s future financial performance and readers are cautioned that this information may not be appropriate for other purposes. 3
SNC-Lavalin and WS Atkins – two highly complementary businesses
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1) Pro forma financials based on SNC-Lavalin fiscal year ended December 31, 2016 and Atkins twelve month period ended September 30, 2016 2) EBITDA adjusted for non-recurring items such as restructuring charges, integration fees, loss on sale of assets and excludes synergies 3) Atkins twelve month period ended September 30, 2016 4) Atkins Energy segment allocated 77% Power and 23% Oil & Gas; Atkins Energy segment allocated 41% Europe, 46% North America, 9% Middle East & Africa and 4% Asia Pacific
Creates a Global Fully Integrated Professional Services and Project Management Company Creates a global fully integrated professional services and project management company with over C$12.1B(1) in consolidated revenue and C$706M(1) in adj. E&C EBITDA(2) on a pro forma basis Deepens SNC-Lavalin’s project management, design, consulting and engineering capabilities to create a more comprehensive end-to-end value chain Grows Position in Attractive Infrastructure, Rail & Transportation, Nuclear and Renewable End Markets Positions combined company to capitalize on expected increase in large scale infrastructure projects globally, principally in North America Creates one of the most compelling nuclear services firms: well placed to win maintenance and decommissioning projects nearing the end of life cycle and subsequent capacity replacement projects Retains a balanced sector diversification(4): 47% Infrastructure, 32% Oil & Gas, 16% Power, 3% Mining & Metallurgy and 2% Capital Strong Synergy Potential and a Proven Successful Integration Plan Identified cost synergies of approximately C$120M per year in both current organizations by the end of the first full financial year after the effective date Integration plan follows on successful roadmap laid out in the Kentz acquisition Limited revenue cannibalization given low geographic and project scope overlap Increases Geographic Reach and Creates New Growth Opportunities in Key Geographies Develops presence in complementary geographies, notably in the U.K., the U.S. and Asian markets, as well as specific areas such as Infrastructure in the Middle East Creates a more balanced global footprint(4): 45% Americas & Other, 20% Middle East & Africa, 20% Europe and 15% Asia Pacific Further Reduces our Business Risk Profile and Improves our Overall Margins Expected to add stability to SNC-Lavalin’s margin and cash flow profile through consultancy-type work Adds approximately C$3.7B(3) of consistent comparatively high-margin revenue, with ongoing revenue from framework and master service agreements, providing long-term repeat business Combination will help SNC-Lavalin further balance its business portfolio
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› Q1 2017 IFRS net income attributable to SNC-Lavalin shareholders of $89.7M, or $0.60 EPS › Q1 2017 adjusted net income from E&C of $60.7M, or $0.40 per diluted share
› 6.1% higher than Q1 2016, due to higher gross margin-to-revenue ratio and lower SG&A, partially offset by higher financial expenses › Oil & Gas and Power Segment EBIT higher compared to Q1 2016
› SG&A expenses decreased by 6.5% compared to Q1 2016
› G&A expenses decreased by $14.9M, or 12.1%, while Selling expenses increased by $3.9M
› Revenue backlog of $10.1B at March 31, 2017
› Q1 bookings of $1.2B
› Cash and cash equivalents of $0.8B at March 31, 2017 › 2017 Outlook maintained – Adjusted diluted EPS from E&C between $1.70 and $2.00
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80% 20% Q1 2017 Revenues
Reimbursable Fixed-Price
5.4%
2% 4% 6% 8% 10% Q2 16 Q3 16 Q4 16 Q1 17
TTM EBIT %
3.4
2.0 3.0 4.0 5.0 6.0 Q2 16 Q3 16 Q4 16 Q1 17
Backlog (in B$)
~$4B revenue business with ~21,500 employees
Improved EBIT %
Backlog remains strong at $3.4B, recently awarded :
Arabia
compressors stations in Colombia
in Australia
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30% 70% Q1 2017 Revenues
Reimbursable Fixed-Price
451
100 200 300 400 500 Q2 16 Q3 16 Q4 16 Q1 17
Backlog (in M$)
10.7%
2% 6% 10% 14% Q2 16 Q3 16 Q4 16 Q1 17
TTM EBIT %
~$500M revenue business with ~1,000 employees
Improved EBIT %
53% increase in backlog, compared to Q4 2016 level, recently awarded:
Chile
Arab Emirates
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50% 50% Q1 2017 Revenues
Reimbursable Fixed-Price
7.2%
4% 6% 8% Q2 16 Q3 16 Q4 16 Q1 17
TTM EBIT %
2.2
1.5 2.5 3.5 Q2 16 Q3 16 Q4 16 Q1 17
Backlog (in B$)
~$1.5B revenue business with ~3,500 employees
Improved EBIT margins
Two Awards of Excellence from the Association of Consulting Engineering Companies – British Colombia
category We see in front of us global nuclear and renewable opportunities
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30% 70% Q1 2017 Revenues
Reimbursable Fixed-Price
5.4%
3% 5% 7% Q2 16 Q3 16 Q4 16 Q1 17
TTM EBIT %
4.0
2.0 4.0 6.0 8.0 Q2 16 Q3 16 Q4 16* Q1 17
Backlog (in B$)
~$2.5B revenue business with ~6,500 employees
Improved EBIT margin
Sustainable backlog, recently announced:
Atlantic Canada
*Following the completion of the sale of its non-core Real Estate Facilities Management business in Canada and its local French
40 80 120 160 Q2 16 (3 mths) Q3 16 (6 mths) Q4 16 (9 mths) Q1 17 (TTM) H407 Others
In M$ 10
Cumulative Net income
$434M
$4B+
Portfolio of value creating assets
407 ETR continues to deliver very good Q1 results (see appendix)
New structure for our North American concession investments (excl. Highway 407 ETR) continues to progress
1 Net Book Value as at March 31, 2017 2 Average Fair Market Value as per analysts
calculations, as at May 3, 2017
In M$, unless otherwise indicated 11
E&C Capital Total
Q1 2017 Q1 2016 Q1 2017 Q1 2016 Q1 2017 Q1 2016
Revenues 1,788 1,931 61 57 1,849 1,988 SG&A 147 158 10 10 157 168 EBITDA, adjusted 100 100 49 44 149 144 Adjusted EBITDA margin 5.6% 5.2% n/a n/a 8.1% 7.2% Net income, as reported 45 31 45 91 90 122 Net income, adjusted 61 57 44 40 105 97 EPS, as reported ($) 0.30 0.21 0.30 0.60 0.60 0.81 EPS, adjusted ($) 0.40 0.38 0.30 0.26 0.70 0.64 Cash and cash equivalent 811 1,388 Revenue backlog 10,079 13,417
6 42 29 31 7 56 32 30 10 20 30 40 50 60 M&M O&G Power Infrastructure Q1 2016 Q1 2017 (in M$)
+3 +14 +1
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Mainly due to lower SG&A, partially
Mainly due to an increase in GM%, lower SG&A and some favorable cost reforecast and outcomes. Mainly due to an increase in GM% and lower SG&A. Mainly due to a lower level of activity and higher proposal costs (business development), partially offset by an increase in GM%. EBIT %
4.8% 6.6% 4.9% 6.5% 7.6% 8.6% 5.5% 6.6%
Power M&M O&G Infrastructure
March 31, 2017 M&M Power O&G Infrastructure
55% 45%
Fixed-Price Reimbursable (in B$)
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As at March 31, 2017 Strong Backlog
March 2017
10.7 10.1
(691) (240) (187)
(in M$) 14
Q1 2017 Cash Balance as December 31, 2016 1,055 Cash flow from operations (187) Capital expenditures (32) Net increase in receivables from long-term concession arrangements (21) Dividends to SNC Shareholders (41) Other 37 Cash Balance as March 31, 2017 811
Improved cash flow from operations Cash flow from operations:
› Reduced working capital usage › Higher EBIT from E&C segments and Capital Partially offset by: › Increase in cash tax paid
Q1 2015 Q1 2016
Sources of Funds ~C$1.3B Equity Issuance ~C$1.1B Recourse Debt ~C$1.5B CDPQ(1) Loan
Financing Overview
Subscription receipt offering ~C$880M public bought deal (including overallotment), representing 17.1M subscription receipts ~C$400M private placement by CDPQ(1) , representing 7.8M subscription receipts ~£300M acquisition term loan from banking syndicate All in interest rate of ~2.0% ~£350M draw on existing revolving credit facilities All in interest rate of ~2.0% Issued at SNC-Lavalin Highway Holdings Inc. level and is non- recourse to SNC-Lavalin Group Inc. Entirely serviced by dividends received by SNC-Lavalin from its interest in the Highway 407 ETR Interest rate of ~6.2% in 2017
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Credit Rating:
S&P has published their report on April 21, 2017, affirming SNC-Lavalin’s rating at BBB following Atkins acquisition and risk profile to
intermediate.
DBRS issued their report on April 21, 2017, affirming that the rating is under review until the closing of the Atkins Acquisition. As per
DBRS standard process, but mentioned that they anticipate that if the transaction closes, a rating confirmation would be likely.
1) Caisse de dépôt et placement du Québec, SNC-Lavalin’s largest shareholder
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Outlook 2017 Adjusted diluted EPS from E&C
($0.36 in 2014, $1.34 in 2015 and $1.51 in 2016 )
› Maintaining 2017 outlook › We anticipate increased Segment EBIT for all segments, except for Mining & Metallurgy. › Does not take into account the recently proposed acquisition of WS Atkins or related financing.
Name Description Held Since Concession Years Location Equity Participation Highways, Bridges & Rail
108 km electronic toll road 1999 99 Canada (Ontario) 16.8%
Rapid transit line 2005 35 Canada (B.C.) 33.3%
Floating bridge 2005 30 Canada (B.C.) 100%
5.3 km electric cog railway 2008 35 France 51%
25 km six-lane road 2010 33 Canada (Alberta) 50%
35.3 km H407 East extension (Phase 1) 2012 33 Canada (Ontario) 50%
Roads 2012 Indefinitely India 10%
Light rail transit system 2013 30 Canada (Ontario) 40%
19 km light rail line 2015 36 Canada (Ontario) 25%
New Champlain bridge corridor 2015 34 Canada (Quebec) 50%
Power
1,227 MW gas-fired power plant 2006 Indefinitely Algeria 26%
550 MW gas-fired power plant 2008 Indefinitely USA (NY) 6.2%
John Hart 126 MW generating station 2014 19 Canada (B.C.) 100%
Health Centres
McGill University Health Centre 2010 34 Canada (Quebec) 60%
Restigouche Hospital Centre 2011 33 Canada (N.B.) 100%
Others
Seawater desalination plant 2008 Indefinitely Algeria 25.5%
NBV1 = $434M FMV2 = $4B+
1 Net Book Value as at March 31, 2017 2 Average Fair Market Value as per analysts calculations, as at May 3, 2017
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20 (in M$, unless otherwise indicated)
Q1 2017 Q1 2016 Change Revenues 260.7 225.3 15.7% Operating expenses 40.2 37.7 6.6% EBITDA 220.5 187.6 17.5% EBITDA as a percentage of revenues 84.6% 83.3% 1.3% Net Income 87.4 64.6 35.3% Traffic / Trips (in millions) 27.5 26.8 2.6% Average workday number of trips (in thousands) 368.2 359.4 2.5% Vehicle kilometers travelled “VKT” (in millions) 564.2 534.3 5.6% Dividends paid to SNC-Lavalin 34.8 31.5 10.5%
15.7% increase in revenues 10.5% increase in dividends paid to SNC-Lavalin
Consistent growth and low cost of financing
21 145 120 135 190 300 460 600 680 730 750 790 24 20 23 32 50 77 101 114 122 126 133 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Dividends (in M$)
Total dividends paid by 407 ETR Dividends received by SNC-Lavalin 300 608.3 250 208.3 3501 400 208.3 2502 340 625 350 400 150 500 500 400 200 300 480 165 2017 2020 2021 2024 2026 2027 2029 2031 2033 2035 2036 2039 2040 2041 2042 2045 2046 2047 2052 2053
Bond Maturity Profile (in M$)
Senior Bonds ($5.8B) Subordinated Bonds ($0.8B) Junior Bonds ($0.2B)
3.87% 4.99% 4.30% / 5.33% 3.35% 5.33% 6.47% 5.33% 5.96% 5.75% 7.13% 4.45% 4.19% 3.30% 3.83% 3.98% 4.68% 3.60% 5.29% / 6.75% 2.43% 2,124 2,253 2,253 2,215 2,336 2,326 2,340 2,356 2,437 2,517 2,641 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gross Vehicle Kilometres Travelled (in millions – KM)
1Issued in November 2016 2Issued in March 2017
3.43%
(in B$)
$0.8 $3.9 $1.8
22
46.3% 24.7% 20.2% 6% 3.3%
$0.4 $0.8 $0.5 $0.1
44% 30% 19% 4% 3% O&G Infrastructure (I&C + O&M) Power M&M Capital
$2.5 $1.6 $0.4 $3.7 $0.3
2016 Revenues
$8.5 billion
Q1 2017 Revenues
$1.8 billion
2016
(12 months)
2017
(3 months)
March 31 2017 December 31 2016 Assets Cash and cash equivalent 811 1,055 Other current assets 3,230 3,135 Property and equipment 310 298 Capital investments accounted for by the equity or cost methods 459 448 Goodwill 3,247 3,268 Intangible assets related to Kentz acquisition 177 194 Other non-current assets and deferred income tax asset 906 900 9,140 9,298 Liabilities and Equity Current liabilities 3,815 3,962 Long-term debt – recourse 349 349 Long-term debt – non-recourse from Capital investments 470 473 Other non-current liabilities and deferred income tax liability 593 618 5,227 5,402 Equity attributable to SNC-Lavalin shareholders 3,885 3,873 Non-controlling interests 28 23 9,140 9,298 Recourse debt-to-capital ratio 9:91 9:91
23 (in M$)
(in M$, except per share amount)
Net Income, as reported Net charges related to the restructuring & right-sizing plan and other Acquisition Net gain on Capital Investment and E&C business Disposals Net income, adjusted First Quarter 2017 In M$ E&C 45.3 2.6 1.1 12.3 (0.6) 60.7 Capital 44.4
89.7 2.6 1.1 12.3 (0.6) 105.1 Per Diluted share ($) E&C 0.30 0.02 0.01 0.08 (0.00) 0.40 Capital 0.30
0.60 0.02 0.01 0.08 (0.00) 0.70 First Quarter 2016 In M$ E&C 31.2 9.2 1.0 15.8
Capital 90.9
39.8 122.1 9.2 1.0 15.8 (51.1) 97.0 Per Diluted share ($) E&C 0.21 0.06 0.01 0.10
Capital 0.60
0.26 0.81 0.06 0.01 0.10 (0.34) 0.64 Acquisition- related costs and integration costs Amortization
assets related to Kentz 24